Capital Economics says the recent US Treasury sell-off looks somewhat overdone.
Economist James Reilly attributes the move in the 10-year US Treasury yield —
now near its June 2007 peak — mainly to higher oil prices and a stronger US
economy, not to AI-related issuance or fiscal stress. Reilly expects Fed
tightening to be less than markets currently price and projects the 10-year
yield will fall to about 4.25% by end-2027. He adds that AI-linked issuance
could exert some upward pressure on yields but less than media reports imply and
likely offset by shifts in monetary policy expectations, and that no recent
fiscal developments justify a large, sustained yield spike.
